In the current economic climate, a substantial number of Australian companies and individuals have accumulated significant debt with the Australian Taxation Office (ATO).
Often, the best way to address spiraling debt will involve placing the company into voluntary administration or liquidation. However, there are scenarios where insolvency processes are not advisable. This is often due to the risk of personal liability, where a director has significant personal assets (that the ATO is aware of). In these circumstances, pursuing a payment plan with the ATO may be the best course of action.
The following article will provide tips on how small business owners (and their registered tax or BAS agents) can best negotiate a payment plan with the ATO.
What is a payment plan?
A payment plan lets you divide your total payment into smaller instalments, spread out over a fixed, short-term period.
Tips for negotiating a payment plan
- Book a free consultation with a trusted insolvency practitioner
A qualified insolvency professional can advise the distressed party on the best course of action and the potential implications of a payment plan or an insolvency process. A large proportion of payment plans result in default, leaving the distressed party vulnerable to more aggressive debt collection practices. It is important to receive advice tailored to the unique situation.
An insolvency professional with integrity will not recommend their services unless they believe they will achieve the best outcome for the client.
- Only propose a manageable payment plan
Much like any other creditor, the ATO’s primary concern is whether the distressed party will be able to maintain their obligations. The ATO will consider previous compliance, paying particular attention to prior tax compliance and/or payment arrangements. It is highly advisable to seek assistance from a trusted tax agent when formulating a proposal.
- Anticipate delays, frustration and setbacks
The ATO is a large, powerful and complex bureaucracy, known for strict compliance and slow response times. Interactions are often impersonal and unclear, with limited negotiation leeway due to strict regulations and guidelines. In some circumstances, mounting debt may be managed more effectively through a small business restructuring or a personal insolvency agreement, which both outline clear timelines and statutory deadlines. These insolvency processes are also currently being positively received by the ATO.
The takeaway
Negotiating a payment plan can be challenging and carries inherent risks. The most critical factor is ensuring the plan is manageable and realistic. If the plan is not viable or the ATO rejects the proposal, distressed individuals or businesses still have options. Seeking a free consultation with a trusted insolvency professional early on is essential to minimise unnecessary risk and find the best solution.
Do you or your client need to speak with an insolvency professional? Call +61 2 9251 5222 to speak with one of our practitioners.
